Cairns Lockie Mortgage Commentary 6 July

Welcome to the twelfth Cairns
Lockie Mortgage Commentary for 2001. This is a fortnightly
electronic newsletter which aims to keep you informed on
developments at Cairns Lockie, Mortgage Bankers and the
mortgage market in general. Previous issues of this
commentary can be found on our website
http://www.emortgage.co.nz/newsletters.htm

The Money
Market

This morning (9am on 6 July 2001) the money markets
were at the following levels:

The Reserve Bank did not
alter the Official Cash Rate on Wednesday and stood firm in
the face of growing pressure for a further cut in interest
rates. The Governor stated that he was aware of
deteriorating conditions overseas, but commented that our
economy was reasonably robust and there were some
unacceptably high inflationary pressures. As a result the
OCR remains at 5.75%. On the same day the Reserve Bank in
Australia also left their rates unchanged. Floating
mortgage interest rates over next month will remain largely
unchanged. As we are seeing some increase in the three and
five year fixed rates the yield curve is becoming more
positive. The Governor will review the OCR again on 15
August. Consensus suggests we will see a decrease by 25
basis points.

Use Your Mortgage for Wealth
Creation

Television advertising regularly exhorts people
to use their mortgage to purchase consumer items, motor
vehicles and other things, such as overseas holidays. We
see people using their mortgages for a number of other
reasons, often for wealth creation, which in many cases
makes the interest tax deductible. Some areas include using
your mortgage to purchase a rental property or to assist
with purchasing commercial properties. We have seen people
borrow to buy shares. When this is done, borrowers tend to
take more of a portfolio approach rather than buying single
shares. We have seen people purchasing shareholdings in
private companies or other higher yielding investments. At
our current floating rate of 7.4%, if your mortgage is tax
deductible, then it is extremely cheap borrowing.

Your
Credit Report - A Valuable Asset.

Everyone who has
borrowed money will have a credit record with one of the
main credit agencies. All lenders, including retail hire
purchase, finance or mortgage companies, get credit checks.
If borrowers do not fulfil their obligations then
collections, defaults, and judgements will be recorded on
their report. If someone has abused their credit position
it will often make it more difficult, expensive, or
sometimes impossible to borrow money. We have seen cases of
younger couples wishing to borrow 90-95% to purchase their
first house being unable to do so because of past abuse of
their credit position. Borrowers should realise that a good
clean credit report is a real asset that will make borrowing
cheaper, quicker and easier.

Peoples' Bank Again

Over
the past fortnight we have seen the considerable and very
public infighting amongst the NZ Post Board. The problems
appear to be over the future direction of the board, the
various personalities involved and how they will launch the
Peoples' Bank. Banking is a relatively risky business,
extremely competitive and difficult to grow. If, as we have
seen, the Board is dysfunctional now, what will happen when
the heat really goes on? This will be compounded by the
apparent lack of banking expertise within the existing
Board. Recent appointments appear to be more political in
nature rather than individuals with extensive postal
services and banking expertise. This does not look good.

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